CommonWealth REIT Arbitration Panel Issues Mixed Ruling

Aug. 8 (Bloomberg) -- CommonWealth REIT said an arbitration
panel denied a request by its largest shareholders to set an
expedited special investor meeting to elect a new board, while
finding that some of the company’s bylaws were excessive.

The panel scheduled a hearing for further consideration of
the issues to begin on Oct. 7, the Newton, Massachusetts-based
real estate investment trust said in a statement today.

Corvex Management LP and Related Cos., which began buying
shares earlier this year and own about 9.6 percent of the
company, sought to void a bylaw that CommonWealth adopted in
March requiring that holders who tried to remove board trustees
hold at least 3 percent of the stock for at least three years.
The companies began seeking votes in April to oust the board
regardless, and said they gained support from holders of more
than 70 percent of the shares.

Corvex and Related sought an order declaring that its
consent solicitation is proper and that CommonWealth should
convene a special meeting of shareholders, which was denied by
the arbitration panel, the landlord said.

The panel found that the changed bylaw is “unreasonably
difficult to achieve,” CommonWealth said. Previous bylaws
requiring that holders own at least $2,000 of stock for at least
one year remain in effect pending a further order, the REIT
said.

“We are gratified by the decision and look forward to
October’s evidentiary hearing,” Keith Meister, the head of
Corvex, and Jeff Blau, chief executive officer of Related, said
in a statement today.

Corvex and Related claim the company’s management structure
has led to conflicts and years of underperformance.

The investors have argued that the ownership of an external
management firm, REIT Management & Research LLC, by company
President Adam Portnoy and his father Barry, a company founder,
has led to conflicts of interest and mismanagement at
CommonWealth. Both Portnoys sit on CommonWealth’s five-member
board and are owners of the external management company.